Peter Kirwan: The rise of the content farms

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Last month, Demand Media, which already has a UK operation, published its IPO prospectus. This autumn, AOL plans a UK launch for Seed.com, a platform for freelance contributions that looks a lot like Demand’s. Homegrown entrepreneurs have taken the hint, too: last week, a marketplace for celebrity coverage called Interview Hub opened for business.

Content farms are an attempt to increase the efficiency with which copy is commissioned, produced and published. Among freelance journalists, the instinctive response is often negative.

No wonder. Would you fancy competing with thousands of new (and far less experienced) rivals for work that pays far less than it used to?

Probably not. At Folio, the US publishers’ site, a journalist called Tony Silber says what many are thinking. Businesses like Demand Media ‘demean and abuse’journalists, he says. On this basis, Silber hopes that Demand Media will ‘go to hell”.

Publishers and editors may end up seeing things differently. Viewed from a long-term perspective, content farms are merely the latest in a long line of efforts to make online content pay its way.

In the late 1990s, technology companies like AOL and Microsoft thought that the best way of diverting ad revenues away from Big Media was to employ former national newspaper journalists at vast expense. Then came the tyranny (or discipline) of search engine optimization, the effort to make all of that expensively-acquired content visible online. The more visible content became, the better it could be monetized (or so went the theory).

While traditional news organisations tried to raise generate sufficient ad revenue to cover the cost of copy generated in traditional ways, others sought to reduce the cost of content to match the ad revenues that were available online.

On this basis, we spent a few years in the middle of the last decade wondering whether anyone could successfully harvest what Clay Shirky calls the cognitive surplus generated by educated, wired, literate citizens who, for the most part, don’t need to generate a living wage from their writing. Content farms have much in common with those early, crude, efforts to commercialize blogging.

Demand Media, Helium and the rest represent an amalgam of much that has gone before. They focus their efforts on efficient copy generation as well as search optmization. The way in which Demand generates story ideas was first outlined by Wired nearly a year ago:

[Demand Media] analyzes three chunks of information. First, to find out what terms users are searching for, it parses bulk data purchased from search engines, ISPs, and Internet marketing firms (as well as Demand’s own traffic logs).

Then the algorithm crunches keyword rates to calculate how much advertisers will pay to appear on pages that include those terms.

Third, the formula checks to see how many Web pages already include those terms. It doesn’t make sense to commission an article that will be buried on the fifth page of Google results.

. . . At the end of the process, the company has a topic and a dollar amount – the term’s ‘lifetime value,’or LTV – that Demand expects to generate from any resulting content.

Content farms reduce the cost of content by using technology to assemble extremely large communities of contributors. The larger the number of suppliers of any given commodity, the further its price falls.

Demand Media says it has 10,000 contributors – only a minority, you suspect, are professional journalists – who generate up to 6,000 pieces of video- and text-based content every day. The US commentator Eric Sherman calculates that Demand Media pays its contributors an average of $7-$10 for each text-based commission (and around $100 for a piece of video). The company generates an average of $54 in advertising revenues from each of its commissions.

This is deflation, red in tooth and claw. How widespread can we expect this deflationary impetus to become? Does Demand Media represent the future of freelance journalism?

It’s credible to imagine the kind of story generation techniques used by Demand – if applied to real-time sources like Twitter – becoming an important prop for news editors.

It’s much more difficult to envisage Demand’s methods applied to harvesting news coverage from a vast outsourced army of cheap freelancers. (Notably, Demand Media stays away from news: it is much more interested in long-life coverage that slowly accumulates clicks and ad revenue.)

That said, you can see parts of Big Media learning from the content farms. One example: Take A Break, the 855,000-circulation women’s magazine published by Bauer, which currently promises its readers that it will pay ‘big cash'(up to £1,000) for their stories of ‘love, betrayal, loss, sin and life”.

What if Take A Break set up a content farm? What if it made the readers who supply those stories about ‘love, betrayal, loss, sin and life’feel less like sources and more like authors? It’s possible that the magazine’s editors could spend less money and end up harvesting more, and better, stories (even if some, or many, of them are written by fantasists).

In the US, AOL is already harvesting real-life disaster stories in this way. Seed.com, the content farm operated by the company, recently promised to pay $30 to anyone who had had experienced, and was willing to write about, a relationship as ‘sickening’as the one between Mel Gibson and 40-year-old Russian singer Oksana Grigorieva.

Demand Media specializes in what its IPO prospectus describes as ‘evergreen, informative, actionable content for intent-driven audiences”. Obsessed by a news agenda that constantly changes, the national press tends to perform poorly when it comes to content like this. Go look on a national newspaper site for advice on growing clematis or which music tracks to download: invariably, the the user experience sucks to high heaven.

Yet sites like eHow, published by Demand Media, suggest that there’s a viable business to be developed out of content like this. It’s a low CPM business that stretches across many years’ worth of clickthroughs and could well be supplemented by e-commerce revenues.

Like Demand Media, why shouldn’t newspaper publishers reduce their upfront costs by encouraging readers to write their own restaurant reviews or CD reviews? Or their own accounts of how to grow clematis?

When Alan Rusbridger calls for the ‘mutualization’of content at The Guardian, surely he’s thinking – in part – about content like this?

The technology platforms devised by AOL and Demand Media to handle idea generation, commissioning and payment aren’t desperately complex. On this basis, expanding beyond the traditional bridgeheads inhabited by specialist gardening, food and music correspondents should be relatively easy. And if Demand Media has charted out the bottom of the market, surely there’s plenty of headroom above its market position for intelligent, well-written and cheaply-produced non-news content that advises and informs readers.

Yes, there’s much to dislike about the way in which companies like Demand Media think about journalism. It’s also true that much of the copy on sites like eHow and Helium is dross.

Yet most of us instinctively know that Tim Armstrong, the former Google executive who now runs AOL, is correct to describe content as ‘the one [remaining] underinvested place on the internet from a technology and structured data perspective”.

The rise of the content farms might feel threatening. But it isn’t all bad. Big Media can learn a few useful lessons from upstarts like Demand Media.